Cardsharp

cardsharp A Kick In The

Teeth? Below: Some festive Moonpiggies on the TV advert. Below middle: A Warhammer

photo upload card from Moonpig.

Left: A cute still from Moonpig’s recent advert.

Have you seen the TV adverts for Moonpig wondered Cardsharp? They feature a lovable cuddly pig puppet called ‘Molly Moonpig’ and it really goes to town on the schmaltz factor in trying to get you to buy Christmas cards via the mobile app. But it’s harmless enough and if it encourages greeting card sending generally thought Cardsharp, then fair enough.

Molly pig from Moonpig is not quite in the same class as Boris’ favourite, Peppa Pig, and Cardsharp can’t see it having a longterm impact like those irritating Meerkats puppets, but it is certainly a change in approach. Interestingly all the emphasis on Moonpig’s Christmas advert was on ordering via its mobile app which it obviously sees as the way ahead, something reinforced in the online operator’s recent half year results.

However, Cardsharp’s hackles were really raised by another Moonpig advert, a radio one this time that has been aired repeatedly on commercial radios, including on the very un-cuddly Planet Rock.

The radio advert implored Christmas card buyers not to waste their time trawling through card racks in ‘dusty card shops’, but to go online and buy them from the Moonpig App. This is just what bricks and mortar retailers and their publishing and wholesaler suppliers, really needed to hear in November and December, their critical trading period reflected Cardsharp.

Cardsharp has uneasy feelings about this advert. Not only is it blatant ‘knocking’ advertising, the kind of which he really can’t abide, but for the first time, Moonpig is somehow undermining its own greeting card industry; an industry which needs to thrive if Moonpig is to. We need a healthy industry where everyone is encouraged to buy and send greeting cards, through a multitude of channels. Moonpig, by airing this advert, and Cardsharp will give them the benefit of the doubt that it was probably its advertising agency who came up with such an approach, it is nailing its colours to the mast as a technology company and not a greeting card company. Cardsharp knows a lot of retailers who were furious when they heard the advert, and quite rightly so. Many publishers were as well, although much of this outrage was privately vented, given that so many of these publishers have received sizeable royalty payments from Moonpig for the licensed use of their designs from the site.

There is no denying that Moonpig has earned its place at the table. It is now effectively a retail giant (and a FTSE 250 company), pulling in more than 50 million orders in its last financial year.

When Moonpig floated in February with a £1.2 billion valuation, investors were excited that it was a Covid winner, which enjoyed soaring sales in lockdown. At the end of the first day of trading, the company was valued at almost £1.5 billion and was seen as highly rated for growth. In June, the shares hit a high of 488 pence, but since then it has drifted downwards to 325 pence. This

still values the company at 30 times its last annual pre-tax profit of £32.9 million, which to Cardsharp’s mind indicates that it is still ridiculously overpriced, but ho hum.

About 54% of Moonpig’s revenue currently comes from cards, and the rest from gifts. During lockdown, not surprisingly Moonpig did well while high street shops were closed (as did the publishers whose designs it licensed). So, no wonder then that its recent results show that its revenues jumped by 113%.

Now restrictions have ended, it has not surprisingly struggled to retain this momentum. Ironically if the Omicron variant leads to further restrictions and spooks shoppers, (admittedly unlikely at this stage) it could help Moonpig, in the short term at least, thinks Cardsharp.

The rate of growth in the frequency of customer purchases versus the prepandemic level has been steadily declining. Revenue over the six months to the end of October declined by 8.5 % on the same time last year. Cardsharp thinks the multi-million dollar question (literally) is how much of the prepandemic era gains it keeps in a retail climate that is free of restrictions. Even optimistic forecasters predict it will be 2024 before Moonpig returns to last year’s profits. It will have to spend out big time on marketing to win new customers as well as invest constantly in new technology, which again will not be cheap. There are likely to be no dividends nor any prospect of a return of cash to shareholders. Not so many silk purses from this sow’s ear for a while then, thinks Cardsharp!

But in the meantime, City sentiment seems to have cooled on Moonpig. Sabah Meddings, the Sunday Times’ share tipster said it was a share ‘to avoid’, although she showed a distinct lack of knowledge by stating “The long-term trend for greeting cards being sent is falling over time”. And City analysts Davey’s criticised its anaemic equity performance since its listing saying, “The risk reward is not compelling”.

Original investors who got involved at the time of the float will certainly have a very long time to wait before they see a return - they might have to even wait until a pig actually lands on the moon! But Cardsharp hopes that in its attempts to gain new customers, our sector’s biggest online operator does not resort to more knocking of traditional retailers.

Strangely enough the Moonpig share price rose by four pence after its recent trading announcement. Ironically Card Factory, the UK’s largest bricks and mortar specialist greeting card chain, who also put out an encouraging trading statement not so long ago, saw its share price drop by about the same amount and is languishing around the 50 pence mark - an incredible six times less than Moonpig’s current share price. Yet even last year with ‘the piggy’s’ record results during the pandemic, it has never made anything like the profit Card Factory was making prior to 2020. Either Card Factory is tremendously under-priced or Moonpig is tremendously overpriced. Cardsharp thinks both are probably true.

No doubt, the huge advertising campaign that Moonpig embarked on before Christmas, both on TV and radio, was an attempt to reignite its sales and increase its market share, but Cardsharp thinks there are better ways of attempting to do this than resorting to shabby knocking tactics. As anyone who has spent time in a sales arena knows, you demean your own product offering when you demean someone else’s. If Moonpig continues down that route, it does not deserve future success, concluded Cardsharp. Moonpig faces a choice. Play by the rules and stay part of the greater greeting card community or become a fully-fledged ‘tech’ company that disrupts in a negative way. Greeting cards are all about sentiment, and it should show a little bit more positive sentiment when it considers its marketing strategy, oinked Cardsharp.

Left: Nicky Raithatha, ceo of Moonpig. Below left: Moonpig’s advertising promotes ordering via its App. Below right: There’s no ‘snout’ about it, Moonpig is a disrupter, but Cardsharp hopes it stays the right side of the greeting card industry ‘fence’. Bottom: Gifts now account for 48% of Moonpig’s revenue.